1.25 Trillion dollars of worth(less) real estate Pt. 2

A few months back I wrote an article questioning what exactly the Federal Reserve was purchasing with 1.25 Trillion dollars worth of tax payers money that the FED didn’t have nor it has been argued was even legal for the Fed to do. But that is another matter. I questioned whether the Federal Reserve was over paying for assets that had clearly depreciated in value. Why else would a bank, bond holder, hedge  fund or Government sell an asset unless they were getting a good deal? After all, these are Toxic assets. I made an assumption that since the housing market had lost 30-40 percent of its value that it was conceivable that the 1.25 Trillion dollars worth of garbage on the Feds balance sheet that they purchased at par value (100%) was probably worth a lot less. One thing I did not include was the commercial real estate properties that the government probably has on its balance sheet (Like the foreclosed shopping mall in the above photo they purchased when they helped JP Morgan Chase buy Bear Stearns.)

Well the Financial Times has just released and article that gives us a peek inside the lies from the Federal Reserve, Treasury and Jamie Dimon, the head of JP Morgan Chase.

Here are some snippets from the article:

“The Fed holds these and other real estate assets in a vehicle known as Maiden Lane I, which was set up to pave the way for JPMorgan Chase’s purchase of Bear.”

“The assets in Maiden Lane I – all of which came from Bear’s mortgage desk – were originally valued at $30bn when a final agreement on the portfolio was reached in June 2008 by the New York Fed, its advisers at asset managers BlackRock and JPMorgan. At the end of 2009 the Fed said the assets were worth $27.1bn (€20bn, £17.4bn).”

“Maiden Lane I was funded with $28.8bn from the New York Fed and $1.15bn from JPMorgan, which agreed to absorb the first $1bn of any losses.”

“As of September they had been marked down to $4bn, filings show.”

You got that? The Fed has assets worth 4 Billion dollars right now that they paid 28.8 Billion for! That is a huge loss of more than 86%. Although this is one example of the assets the Fed has purchased and it is possible that not all of the securities the Fed have purchased has lost this much it is possible that the Fed has spent 1.25 Trillion dollars on assets that are currently valued at 50-85% less than what was paid for them. That could equate to a loss of 500-800 billion dollars.

And Today Barak Obama says he saved America from a Depression. Bullocks! He has only transferred the losses of private banker buddies onto the back of the taxpayers. Once the 2010 elections are over taxes are going to explode higher to pay for all of this and contrary to what this moron says, America is in big, big trouble.

Paul Weller “Headstart for Happiness”

One of my favorite artists singing one of my favorite songs.

The main reason the American Economy is dying

 

A couple of weeks ago I came across a website that has an up-to-the-second U.S. trade deficit ticker. The  U.S has had a trade deficit every year for more than 30 years!

Every month and every year we run a trade deficit we are giving away American wealth to the rest of the world. When  U.S. companies build factories in China and ship our jobs overseas for cheap labor while we import the goods back into America. Everything is made in China now and very little is made in the U.S.  China is just one of the countries we have outsourced our jobs to as Japan, taiwan, Singapore, Malaysia and other Asian countries are now the manufacturing hub of the world. In addition to manufacturing goods we import more than 80% of our oil. While some of this money goes to Mexico and Canada the majority of it goes to the middle east so some sheikh can drive a car made of solid silver. Over the last few years we have even started outsourcing customer service jobs to India and other countries. A recent study showed that 25% of the jobs in the United States are outsourcable.

The Trade ticker does not go all the way back to 1978 but you can see that since January of 2003 the United States has had a trade deficit of more than 4.3 Trillion dollars. That is 4.3 Trillion dollars of U.S. wealth that now belongs mainly to the Chinese and the Middle East. The very same people we are now indebted to and are some of our biggest creditors

The real cost of cheap goods from Walmart

Not really much to say here. I think the pictures say it all. Take a look at the Environmental cost of China’s rise to economic glory and think about these photos the next time to run to Walmart for that $4 dollar toaster.

http://www.chinahush.com/2009/10/21/amazing-pictures-pollution-in-china/

Bernanke confirmed even though Americans disapprove

When politicians do not listen to the people who got them elected they generally do not stay in office for too long. Lat week the Democratic lead congress voted for  Ben Bernanke to continue to lead the Federal Reserve and to continue to lead America off of an Economic cliff.

Both Fox News and the Wall Street Journal show the overwhelming majority of people polled did not think Bernanke should be reappointed. Now granted, Fox business news is a Right leaning news outlet and the Wall street is slightly less leaning. But I have searched many articles including one by Rasmussen which said fewer than 21% of Americans favor Bernanke.

I don’t think it really matters as the Republicans are just as big of failures as the Democrats but the 2010 elections are going to be very interesting. All of those who voted for Ben Bernanke’s reappointment may want to look for other work.

America is turning Japanese

Last week the Democratic Congress voted to raise the U.S. Debt ceiling to an astounding 14.3 Trillion dollars. Every Democrat voted for the increase.

Japan has been mired in a deflationary spiral for more than two decades. They now have a debt to GDP ration of more than 200%. Two top American Economists have written a paper  that studies the effect of debt on GDP and concluded that once a country reaches a debt to GDP ratio above 90% the average growth rate is lowered by 1%. So, apparently Dick Cheney was wrong when he said deficits don’t matter.

The U.S GDP in 2009 was estimated at 14.27 Trillion. Which means the United States has reached a debt to GDP ratio of 100% percent. So growth forecasts will now actually come in lower than the Obama administration’s rosy forecasts. What is even more disturbing is the Obama administration has passed a 3.8 Trillion dollar budget where 1.9 Trillion of it is debt! So even if America manages to survive 2010 (which I doubt), we will still have to lift the debt ceiling a year from now.

If that weren’t bad enough we have done nothing to address the debt that is STILL in the system more than 3 years after the crisis began. Banks have trillions in toxic assets on their books, the US consumer is de-leveraging but still has a long way to go, real estate is being artificially propped up etc. Rather than take our medicine and experience a depression for two or three years and clear the bad debt America is going the way of Japan. So get ready for 20 years of sad economic times.